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Save smart by checking if you are missing out on these deductions, which are often overlooked

This tax-saving season, don’t scramble to save more. Save smart by checking if you are missing out on these deductions, which are often overlooked.

Struggling to save and meet the income tax-declaration filing deadline with your employer? Gathering resources from all ends in the last-minute tax saving rush? Before you get into the saving tizzy, have a look at these deductions that you may have missed. Chances are, by now you would have already fulfilled your tax-saving needs and would not need additional funds to invest.

Do note that these deductions have an overall ceiling. For instance, all deductions under sections 80C, 80CCC and 80CCD are offered subject to a maximum of Rs1.50 lakh. However, the deductions for select investments and income are offered over and above the limits, such as for National Pension System (NPS) and first-time home buyers’ deduction.

Rebate: If you are an Indian resident and your income is within Rs5 lakh, then a rebate of up to 100% of such income-tax or Rs5,000 (Rs2,000 from financial year (FY) 2013-14 to FY2015-16), whichever is less, is provided under section 87A. This is beneficial to people who have a small amount of income overshooting the tax-free income limit. Note that this rebate is applicable before levies such as education cess and surcharge.

Property-related taxes: If you have paid taxes levied by local authorities during the relevant year, then the same can be deducted against ‘income from house properties’ as per the first proviso of section 23(1). Stamp duty and registration charges paid for transfer of property also qualify for deduction under section 80C.

Health-related expenses: If you were under the view that only the amount paid as premium for health insurance is permitted for deduction, then you would be relieved to know that expenses made towards health care can also be claimed for deduction, subject to certain conditions. Costs incurred on a preventive health check-ups for self or dependents can be claimed for deduction, up to Rs5,000 under section 80D. However, this Rs5,000 is also a part of the overall deduction limit of Rs25,000 for self and Rs30,000 for senior citizen parents.

Those who bear the medical expenses from their own pockets, due to lack of health insurance for very senior citizens (above 80 years), can claim up to Rs30,000 spent as medical expenditure under section 80D.

Additional Rs50,000 deduction: If you have exhausted the section 80C limit of Rs1.50 lakh and are still looking to save more tax, then the section 80CCD (1B), introduced from assessment year 2016-17, offers an additional deduction of up to Rs50,000 for investments made in the National Pension System. However, only the contributions made to tier-1 accounts are tax deductible and the investments in them are, barring a few circumstances, locked in till retirement.

Rajiv Gandhi Equity Savings Scheme: If your income is below Rs12 lakh and you have not invested in the stock markets earlier, you can claim 50% of the amount invested in select equity savings schemes for three consecutive assessment years. The ceiling for this deduction, which falls under 80CCG, is Rs25,000.

Indexation: If you bought a property at Rs1 lakh and sold it years later for Rs1 crore, would the entire Rs99 lakh be considered your gain? Not if you sell it after 5 years (when it becomes long-term gain). A process of adjusting purchase price to inflation comes into play for select assets and investments such as debt mutual fund investments and property. This is called indexation and has the potential to reduce your tax outgo for investments held for long term. Check the period that is considered long term, as it differs from one asset to another.

Disability: A deduction of Rs75,000 (Rs1,25,000 in case of severe disability) is offered to a resident individual or Hindu Undivided Family (HUF) for expenditure on medical treatment, training and rehabilitation of a disabled dependent with conditions such as autism, mental retardation and cerebral palsy, under section 80DD. If the disabled wants to claim the deduction for self, then it needs to be done under section 80U. Certification by relevant authorities is needed.

Specified diseases: Both HUFs and resident individuals can claim deduction on the expenses incurred towards medical treatment of certain diseases, for up to Rs40,000 (Rs60,000 for a senior citizen) under section 80DDB.

Deductions for authors and innovators: If you have been receiving royalty income on literary, artistic or scientific books, or on a patent that you have registered after 31 March 2003, then you can claim an additional deduction of Rs3 lakh on such income. Authors can claim tax deduction under section 80QQB, while patent holders can claim it under section 80RRB. Such income earned in foreign lands needs to be brought back to the country within the specified time limit, to claim the deduction.

So, look back at the financial year and trace the transactions that you have made in these specific areas, to know if you are eligible for any of these neglected deductions.

Vaibhav Sankla is managing director of H&R Block, India.